Tightening the practice in the field of intra-group hiring of services – new SECO directive

The State Secretariat for Economic Affairs (SECO) recently published a directive regarding intra-group hiring of services in which they state that group internal hiring of services requires an official license. Only in narrowly defined exceptions can the obtaining of an official permission be waived.

1. Intra-group hiring of services requires official permission – general rule
The previous SECO directive from the year 2003 indicated that hiring of services between group-affiliated companies does not generally require an official license. Consequently, numerous group companies hired services on a commercial basis and on a large scale without obtaining an official license.

After some group companies apparently considered establishing so-called staffing firms for their group internal hiring of services the SECO felt obliged to tighten its practice and to allow intra-group hiring of services without an official license only in exceptional cases. Accordingly, hiring of services between group-affiliated companies now generally requires an official license.

2. Intra-group hiring of services without an official license
Henceforth, an official license is not required if services are only hired on an individual and occasional basis and if the hiring promotes the acquisition of professional, linguistic or other experience or serves the transfer of know-how.
SECO has provided the following criteria as an indication for permitted intra-group hiring of services without an official license:

The employee is primarily employed to work for one entity of the group. The hiring of services to another entity of the group was not originally intended and merely takes place in an individual case.

The hiring of services is not the lending company's main purpose.

The hiring of services is for a limited time period.

The hiring of services takes place occasionally. For instance, to allow the employer to overcome
a sharp decline in orders and the hirer to cover additional short-term staff needs.

The acquisition of experience and/or the acquisition/sharing of specific skills and knowledge is the main purpose.

The employee has the opportunity to work abroad or to collect work experience in another entity of the group.

A know-how-transfer takes place within the group, for instance a new software can be implemented in the entire group or the worker can be trained in working with a new machinery.

Contrary to the prevailing prohibition, cross-border hiring of services into Switzerland is permitted, if the abovementioned conditions are fulfilled.

3. Assessment of the new practice
SECO's initial liberal practice in the field of intra-group hiring of services has resulted in numerous cases of abuse in the past, which is why it tightened its practice in the last years. The new directive regarding intra-group hiring of services came as no surprise, but rather as a confirmation of SECO's current practice and is therefore appreciated, at least in the interests of legal certainty.

Nevertheless, the change of practice which was published by way of directive might lead group companies to reassess their internal hiring concepts and, where required, to obtain an official license. Otherwise, in the event of breach, group companies risk a fine up to CHF 100'000.